Economic week of Kyrgyzstan Oct. 5

On Oct. 4, 2020, the business part of Kyrgyzstan's society did not expect that the next week would be the most dramatic and their business could slow down dramatically. The mass riots lasted for almost ten days, threatening the stable work of almost the entire economy of the country. Despite the increased risks, entrepreneurs, and especially rural workers, farmers, continued to work. Business structures that conducted import-export activities were noticeably affected, since the banking sector was forced to suspend its work for several days by the decision of the National Bank. In this regard, two significant participants in entrepreneurial activity at once - the business ombudsman and the IBC, expressed serious concern and expressed their proposals. Nevertheless, farmers have begun harvesting, a unified mining tax is introduced, and collectible coins have been issued. Unfortunately, it became known of a decline of the country's GDP, foreign trade is declining, and the country's capital has suffered.

Nevertheless, the business life in the country continues.

Closed banks. During the post-election events in Kyrgyzstan, the greatest danger could hang over financial companies in the first place. As a result, the National Bank of Kyrgyzstan immediately decided to suspend the activities of the banking sector.

The decision was made in order to ensure the safety of the country's financial and banking sector and the safety of the assets of financial and credit institutions

Commercial banks and non-bank financial institutions suspended their work on Oct. 7, 2020 and increased security measures until the political situation in the country stabilized.

Despite the fact that the banking system resumed its work after a while, all its operations are carried out only within the country.

The National Bank of the Kyrgyz Republic explained that SWIFT (international interbank system for transferring information and making payments) has been disabled in order to prevent the withdrawal of funds from the country.

Concern. During the two weeks of political turbulence in Kyrgyzstan, Business Ombudsman of the Kyrgyz Republic Robin Ord-Smith expressed his alarm and concern at the wave of criminal activity that the business community faced - attacks, robberies and looting of property of entrepreneurs and investors.

According to the press service of the business ombudsman, such actions violate the fundamental principles of the laws of the Kyrgyz Republic on the rule of law, the right to private property, while causing colossal damage to the economy and the international image of the country.

“These illegal actions not only cause significant short-term damage to business and the country's economy as a whole, but also have negative long-term consequences for business and the investment climate,” the statement said.

Free from taxes. Vehicles with electric motor are exempt from a number of taxes in accordance with the Law of the Kyrgyz Republic dated Aug. 12, 2020.

In addition, the supply of vehicles powered only by an electric engine and manufactured at enterprises of \ Kyrgyzstan, as well as the import of vehicles with only an electric engine and equipment for charging them with electricity are exempted from VAT.

IBC’s appeal. This week, the International Business Council of Kyrgyzstan called on government agencies and local governments of the country to ensure the unhindered movement of employees and vehicles of busuness companies, including at night time.

This was due to the fact that in the days of political instability, IBC and other business associations of the country received numerous appeals from entrepreneurs about possible restrictions related to the state of emergency in Bishkek.

The call is aimed at avoiding disruptions in the activities of companies supplying food and other goods and services in Bishkek.

Damage in Bishkek. In connection with the political events in the capital, Bishkek Mayor Aziz Surakmatov said that the preliminary damage amounted to more than 17 million soms.

At the same time, the mayor noted that all structural and territorial divisions are working in an enhanced mode, ensuring life in the city of Bishkek.

During the riots in Bishkek, 13 buses, 16 service vehicles were smashed, 65 sq. m. of granite slab was smashed and stolen in the Ala-Too square, 7 ambulances were damaged.

Economic decline. The GDP of Kyrgyzstan for the period January-September 2020 amounted to more than KGS 400 billion and, compared to January-September 2019, decreased by 6.0%.

According to data of the National Statistics Committee of the Kyrgyz Republic, excluding enterprises for the development of the Kumtor field, the volume of GDP in January-September 2020 amounted to more than KGS 350 billion and decreased by 7.1 percent.

In January-September 2020 (compared to December of the previous year), the increase in consumer prices in the republic as a whole amounted to 2.9%. At the same time, prices for food products and non-alcoholic beverages increased by 5.3%, alcoholic beverages and tobacco products - by 5.6%, tariffs for services rendered to the population - by 0.2%. Prices for non-food products during this period remained at the level of January-August of this year.

Decline in trade. On these critical days for Kyrgyzstan, it was announced that the country's foreign trade turnover in January-August 2020 amounted to about USD 3.5 billion and, compared to January-August 2019, decreased by 22.1%.

According to the National Statistics Committee of the Kyrgyz Republic, while export supplies increased by 3.5%, while import receipts decreased by 31.6%.

The volume of mutual trade of the republic with the EAEU member states in January-August 2020 amounted to about USD 1.5 billion and, compared to January-August 2019, decreased by 19.4%.

Export deliveries to the Union countries decreased by 22%, and import receipts - by 18.6%. The largest share of the republic's mutual trade with the EAEU member states fell on Russia (65.7%) and Kazakhstan (32.3%).

Harvesting. Despite the political crisis, the harvest of agricultural crops is nearing completion in the country.

According to data of the National Statistics Committee of the Kyrgyz Republic, as of Sept. 24, grain crops (excluding legumes, rice and buckwheat) were harvested from the area of 538.3 thousand hectares in the country as a whole, which is 4.0% more than on the same date last year, threshed grain (in the originally capitalized weight) 1,696.8 thousand tons, or 5.6% more than a year earlier.

The gross harvest of wheat in the republic as a whole increased by 4.7%.

Growing exchange rate. In connection with the turbulent events in the country, its influence on the foreign exchange market was noticeable. In order to stabilize the situation in the foreign exchange market, the National Bank of the Kyrgyz Republic was forced to carry out foreign exchange intervention again.

On Oct. 15, USD 17 million 100 thousand were sold to maintain the declining rate of the som.

This was the 14th intervention in 2020. At the moment, the rate of the American dollar exceeded 81.10 Kyrgyz som per one US dollar.

Mining tax. It was announced this week that the mining tax in Kyrgyzstan will replace three taxes.

In accordance with the statement of the State Tax Service of the Kyrgyz Republic, a special tax regime is being introduced in Kyrgyzstan for entities operating in the field of mining.

Mining is the activity of carrying out, using software and hardware, computing operations that ensure the functioning of the register of transaction blocks (blockchain) by entering information about transactions between users in a distributed register (according to predetermined rules and principles), which requires continuous power supply.

Collectible coins. Collectible coins of the National Bank are taking part in the international annual competition of commemorative coins "Coin Constellation - 2020".